Sightholders Dropped for BPP Violations

By Rob Bates -- JCK Online, 3/1/2008 2:00:00 AM

Six sightholders were recently dropped by De Beers' Diamond Trading Company for alleged violations of its Best Practice Principles, a code of ethical guidelines.

According to market talk, four had been on the new sightholder list, while two already had been dropped. The six, all Indian-owned firms based in Antwerp, Belgium, were implicated in the trial of Gerard Brenig, who received two years in jail for his role in a scheme involving falsified diamond invoices, according to local press accounts.

Thirteen diamantaires, including the six sightholders, were implicated, the accounts say. They received suspended six-month jail sentences.

As a result of the case, “the DTC has communicated to [the] sightholders that it is suspending supply to them, with immediate effect,” says DTC spokeswoman Louise Prior. “Pending the results of further due diligence into this matter, the DTC reserves its right to take all appropriate action.”

Most of the companies have not publicly commented, but C. Mahendra Exports said in a statement that it has never breached the BPP. “C. Mahendra Exports Ltd. challenges the suspension of its DTC sightholder status and vehemently defends itself against any suggestions of wrongdoing or malpractice,” it says. “The decision of the Diamond Trading Company to suspend supply has been taken without providing an opportunity for C. Mahendra Exports Ltd. to defend itself [and is] based on an incorrect understanding of the facts.”

The company said it was “necessary to make this statement in public in order to protect its reputation, which is currently being unfairly damaged in the industry as a result of this supply suspension.”

One factor the companies may be counting on in future legal challenges is that the offenses in the Brenig case date back to the 1990s. The Best Practice Principles weren't even proposed until the year 2000.

Antitrust Lawyer Takes On W.B. David Case

Jared Stamell, one of the attorneys who won the $300 million class-action settlement from De Beers, is handling ex-sightholder W.B. David's case against the company.

W.B. David was a longtime New York sightholder that sued De Beers when its client privileges were taken away in 2003. Shortly after, W.B. David went out of business. Its lawsuit was considered a transferable asset and taken away from the original attorney.

Stamell's appointment was contested by De Beers' lawyers, who argued it was a conflict with his antitrust work, but eventually it was allowed to stand.

Stammel plans to refile the W.B. David suit and has indicated he'd like to pick up clients among other dropped sightholders. He wouldn't say whether or not he's talked with any.